Buzz Newsletter

How Venture Capitalists Talk: You Can Make It ... Will Someone Buy It?

by Joseph W. Bartlett, Special Counsel, McCarter & English LLP


A major source of error is a love affair between a founder and the technology he has developed in the lab. The number of new and interesting ideas brought into being every year is astonishing. A field trip to any respectable college or university will reveal a fascinating array of projects in the laboratories, many of which, if brought to fruition, will certainly improve the state of the art. However, a critical error of founders considering whether to commit capital to a project is to assume that the novelty and utility of a new technology are both necessary and sufficient for the success of a start-up. Novelty may be enough to secure a patent, but it is only one part of the venture-capital equation.

No one can make any money unless there is a market for the product, unless people are willing to buy it at a price that returns a profit to the manufacturer.

Assuming the idea is any good, is there a market for it? This simple, banal truth is overlooked time and again by the fledgling entrepreneurs. Is there a market which can be penetrated at a reasonable cost?


The classic example is the pen that writes under water — interesting technically but, as it turned out, no one wanted to buy one because no one wanted to write a letter beneath the waves.


Thus, the single most commonly cited reason for failure of a start-up is the inability to implement a well-thought-out marketing plan. Selling is a matter of airplanes, hotel rooms, and shoe leather; as Willy Loman put it, "on the road with a smile and a shoe shine." Marketing, on the other hand, has to do with understanding the demand for the product, pricing strategy, evaluating channels of distribution, and maximizing dollars spent on sales. Moreover, the market has to be large enough to support an interesting company. The enterprise with less than $10 million in sales and nowhere to go is usually not a suitable target for venture-capital financiers. Companies of that size are known as the "walking dead" in a venture portfolio – too small to go public and too large to abandon.

View Joe's Blog >>>
JBartlett Joseph W. Bartlett is a recognized pioneer of the national private equity and venture capital bar, Mr. Bartlett is special counsel in the Corporate, Securities and Financial Institutions practice for McCarter & English. He is also founder and chairman of VC Experts, for which he is an active contributing editor. Mr. Bartlett is a frequent speaker on industry issues and lectures as a faculty member at Cornell's Johnson School of Business.

JBartlett@McCarter.com

Full Bio

Sign_Up
Date Title Author
04/17/2014 How Venture Capitalists Talk: You Can Make It ... Will Someone Buy It? Joseph W. Bartlett, Special Counsel, McCarter & English LLP
04/16/2014 A Simple Act of Congress to Make Things Better for Startups William Carleton, Contributing Editor, VC Experts
04/15/2014 Big Boys Take Big Risks: Big Boy Letter Bars Investor State Law Fraud Claims Owen Pell and Francis Fitzherbert-Brockholes of White & Case LLP
04/10/2014 What Entrepreneurs Need To Know About Stock Options Joseph W. Bartlett, Special Counsel, McCarter & English, LLP
04/09/2014 Non-Accredited Crowdfunding: A License To Pillage The Vulnerable, Or Democracy In Action? William Carleton, Contributing Editor, VC Experts
04/08/2014 Siga Technologies And The Boilerplate Fallacy Joseph W. Bartlett, Special Counsel, McCarter & English LLP
04/03/2014 7 Tips for Start-Ups Joseph W. Bartlett, Special Counsel, McCarter & English, LLP
04/02/2014 SEC Official To Angel Community: Go Ahead, Develop Your Own Verification Methods! William Carleton, Contributing Editor, VC Experts
04/01/2014 Strategic Considerations for Start-Up Private Equity Fund Managers Bradley M. Van Buren and Frank M. White Jr. of Holland & Knight LLP
03/27/2014 2 Common Down-Round Characteristics, Feat. Jiwire VC Experts Intelligence Team
03/26/2014 Delaware Chancery Court Decisions Highlight That A "Crucial Difference" In Analyzing Director Liability For "Bad Faith" In the Context of an M&A Sales Process Is the Seriousness of the Bidder David A. Niemeyer of Sheppard Mullin Richter & Hampton LLP
03/25/2014 SEC No­-Action Letter re M&A Brokers Andrew M. Ross of Cozen O'Connor
03/20/2014 Three Common Stock Transactions That May Affect Your IRC §409A Valuation Jim Timmins, Managing Director of Teknos Associates
03/19/2014 Further Thoughts About The Public Disclosure Requirements In The Washington State Crowdfunding Bill William Carleton, Contributing Editor, VC Experts
03/18/2014 Top Ten Tips for Purchasing and Negotiating Representations and Warranty Insurance Micah E. Skidmore of Haynes and Boone, LLP
03/13/2014 White Paper: Navigating Change in the Private Capital Markets ACE Portal
03/12/2014 In A Merger, When Are Preferred Stockholders Not Entitled To A Liquidation Preference Payment? Peter J. Walsh, Jr., T. Brad Davey, Thomas A. Mullen, and David B. DiDonato of Potter Anderson & Corroon LLP
03/11/2014 Looking Under The Hood At The Washington State Crowdfunding Bill William Carleton, Contributing Editor, VC Experts
03/06/2014 Director And Officer Indemnification And Insurance - Issues For Public Companies To Consider John F. Olson, Johnathan C. Dickey, Amy L. Goodman, and Gillian McPhee of Gibson, Dunn & Crutcher LLP
03/05/2014 Top Labor And Employment Law Issues When Taking Your Start-Up Global Megan Muir of The Venture Alley at DLA Piper LLP
Prev 1 3 4 5 6 7 8 9 62 63